Everyone’s tax situation is different, and although there can be various reasons behind anyone’s failure to file taxes on time, there are actual consequences to expect when your taxes are filed late.
Missing the April deadline is one thing but in the case of filing taxes, late really is better than never. Tax penalties and consequences of failure to file are real. Despite what you may have heard, it is far better to file your taxes late than not at all; and in the long run you’ll be better off taking care of your tax situation versus waiting for the IRS to initiate contact.
What Are The Consequences Of Not Filing Your Taxes?
Losing your tax refund and having to deal with tax penalties that will turn into having to pay even more money are some of the main consequence of not filing your taxes on time. Missing the deadline may hit you with a failure-to-file penalty that can range from five percent to twenty-five percent of what you already owe. If you’re owed a refund you may skip the late-filing fee, but you may not get anything back unless you file a tax return with a deadline of up to three years to claim said refund before losing it to the agency.
If you’re unable to file your taxes in time you can apply for an extension before the IRS notifies you, which will allow you six more months to file your tax return. However, an extension may only save you from the 5% penalty, but you still have to pay the taxes you owe.
Late fees may start at 0.5% of your tax bill counting from the first day you’re late. Add to that the posibility of 3% daily compounding interest on the unpaid balance and there’s a good reason to be concerned about your failure to file taxes on time.
Prevent your situation from getting worse by understanding exactly what you owe. From there, you can work on a plan to start paying as much back as fast as possible. By paying at least 90% of the due balance before the April deadline, you can avoid any late payment penalties. Ideally make sure you clear your debt before the extended deadline expires.
What If You Do File, But Are Unable To Pay?
Even if you can’t pay your taxes in full, it’s still better to file your taxes on time. By filing your taxes on time the IRS may give you a discounted late-payment fee of 0.25% as long as there’s a payment agreement in place.
If you owe less than $25,000 the, approval of an installment plan will be automatic only if you can prove you’re unable to pay the total amount you owe at the time it’s due and do so in three years or less.
Other installment plans may be available if your overall debt doesn’t amount to more than $50,000, but even if you’re several years behind, the problem can still be solved by handing your case to a tax professional who will look into the details and help you work out a plan.
Why Failing To File Your Taxes Isn’t Really An Option
As you can see, there are actual consequences to failing to file your taxes. The idea that somehow you can get away with it isn’t realistic at all, especially considering the amount of information the IRS has. If you try to evade your tax responsibilities, you will eventually hear from the IRS.
In the end, avoiding your taxes will come back to haunt you, which is why it’s better to be safe than sorry. At Mitchell Advisory, we have years of experience in helping individuals address their tax situation. We will help you come up with the best possible solution to get your taxes files and help you get caught up.